Monday, April 25, 2011

Many in our state legislature have signed the Taxpayer Protection Pledge of Americans for Tax Reform, in which they vow to never vote for any tax increase. As evidence of the anti-tax zeal of our legislators they even pushed through a very large corporate tax cut during the legislative session that just ended - before they got around to dealing with our current state budget, which is $1 Billion in the red. Never mind that any future shortfalls in state revenues that might result from those budgets cuts (if the projected increased revenues due to expanded business activity in the state fails to cover the foregone taxes) will have to be made up somehow - and the state budgets are cut pretty much to the bone at this point. They are also reducing state-shared revenues to the cities and counties, which will have to be made by either cutting local services or raising local taxes (property or sales) and forcing cities and counties to fund things that the state previously did - like housing prisoners short-term. And more recently they passed legislation, that has since been signed by the governor, that determines how certain state agencies can spend the money they have available to them and permits the Department of Water Resources to make up a gap in its budget (caused by the legislature taking away previous general fund appropriations) by imposing a new tax on municipalities in the state (they call it a fee in the bill, so maybe they think that means it's not really a tax).

So, no, our state legislature will not permit the imposition of new taxes that would violate their pledge. But they have no compunction about establishing rules that require other entities to increase taxes to make up for revenue shortfalls that result from fund sweeps, budget cuts, and sweetheart tax breaks to favored entities. Way to be consistent in your ideology folks.

Friday, April 22, 2011

Tony Davis has an article in the morning daily congratulating Tucsonans for their thrifty water use habits. In the article, he does a nice job of pointing out the obvious connection between conservation and giving consumers information about their water use - unmetered uses will almost always be higher than metered uses (assuming there are volumetric charges for the water). But there is always bad news that must accompany good news (wouldn't want folks getting too cocky). In this case, reduction in water use is rewarded by increases in water rates because of the way rates are structured in Tucson. Here's how it works:

Tucson water rates are set in increasing blocks - the more water you use, the higher your rate per unit of use; this is intended to send a strong conservation message to consumers

when rates are increased most of the increase is added to the upper blocks (don't want to punish the people who are doing the best job of conserving)

Here's what Tucson's rate structure looks like on a graph, comparing it to other 4 block rate structures:

over time, because most water revenue is derived from water sales, the utility becomes overly dependent on sales in the higher blocks to meet its revenue targets

who do you think is most likely to conserve when water rates increase, especially rates in the higher blocks? That's right - the users in the higher blocks, because much of that use is discretionary

the next year, the utility projects another revenue shortfall so rates go up again, even though there was increased conservation the previous year

How do you fix this? You restructure your revenue model so that more of your fixed costs are covered by fixed revenues (monthly service charges paid by all customers or increase the rate in the first block).

Here's how Tucson's monthly service charge compares to those from several other cities:

This is what Tucson Water is trying to do this year, but they are certain to get pushback from the city council because of the potential impact on low-income customers. So we'll be revisiting this issue again next year, and probably the year after that.

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About Me

I am a hydrologist, Arizona Registered Geologist, and attorney with a longstanding interest in water/land use issues. Trying to make some sense of the intersection (or lack thereof) between water policy and land use in a rapidly growing, water-challenged landscape.